Hain Delivers Strong 4Q - Analyst Blog
August 23 2012 - 4:15AM
Zacks
Rise in consumption, expanded
distribution and productivity savings along with pricing
facilitated The Hain Celestial Group Inc. (HAIN),
to post strong fourth-quarter 2012 results. The company reported
adjusted earnings of 47 cents a share, which surpassed the Zacks
Consensus Estimate by couple of cents and jumped 30.6% from 36
cents earned in the prior-year quarter.
Including one-time items, earnings
came in at 50 cents compared with 28 cents a share earned in the
year-ago quarter.
Key Numbers
Revenue for the quarter rose 22.3%
year over year to $350.7 million, reflecting rise in demand for
natural organic products. The company noted that consumption in the
U.S. grew 14%. Including sales of the United Kingdom private label
chilled ready meals operations (discontinued business), revenue
came in at $373.8 million, up 28% year over year. The Zacks
Consensus Estimate was $366 million for the quarter.
The company registered increased
consumption in core categories with robust contribution from
Earth's Best, MaraNatha, Garden of Eatin, The Greek Gods, Imagine,
Linda McCartney, Spectrum, Health Valley and Avalon Organics. Hain
Celestial also experienced solid sales across recently-acquired
brands.
Gross profit ascended 14.7% year
over year to $93.4 million in the quarter. However, gross margin
contracted 180 basis points during the quarter to 26.6% as
productivity savings were more than offset by input costs.
Adjusted operating profit jumped
26.6% to $36.2 million in the quarter, while adjusted operating
margin expanded 36 basis points to 10.3%, indicating a 210 basis
points decline in SG&A as a percentage of sales.
The company ended the quarter with
cash and cash equivalents of $29.9 million, long-term debt of
$390.3 million and shareholders’ equity of $964.6 million.
Operating free cash flow shot up 152.3% year over year to $36.8
million.
Acquisitions Driving
Growth
Acquisitions have played a key part
in Hain Celestial’s strategy of building market share. These
acquisitions have not only widened the company’s geographical
presence, but have also provided opportunities to cross-sell
products in the U.S., Canadian, and European markets.
Adding to the series, the company
announced the acquisition of leading packaged grocery brands from
Premier Foods plc's, including Hartley's, Gale's Robertson's, Frank
Cooper's and Sun-Pat. The 200 million pounds ($316 million)
cash and stock deal is expected to close by the end of October.
The acquisition is expected to be
accretive to its earnings upon completion. Moreover, it is expected
to bring in incremental sales as it provides a strong foothold to
the company in the packaged food and grocery market that is swiftly
gaining ground.
Further, the company stated that it
has completed the sale of its private label chilled ready meals
business and also entered into a letter of intent to sell the Daily
Bread sandwich business.
Guidance
The company expects to sustain
strong momentum across entire business segments as it remains well
positioned to capitalize on the growing global demand for organic
products.
The company now expects sales to be
in the range of $1.600 billion to $1.615 billion in fiscal 2013
(excluding results for the discontinued operations of private label
chilled ready meals). Earnings are expected to be in the range of
$2.10 to $2.20 a share.
Going forward, we believe that the
company will be able to mitigate the cost pressures through
increased productivity and efficient pricing.
Moreover, Hain Celestial has
undertaken a number of initiatives to improve its performance and
has put itself on the growth trajectory. The company’s Stock
Keeping Unit (“SKU”) rationalization program has helped eliminate
SKUs, which had lower sales volume or weak margins. Management
remains focused on improving profitability through new product
introductions while reducing costs.
Currently, we have a long-term
‘Outperform’ rating on the stock. Hain Celestial, which competes
with General Mills Inc. (GIS) and Kraft
Foods Inc. (KFT), holds a Zacks #3 Rank, which translates
into a short-term ‘Hold’ rating.
GENL MILLS (GIS): Free Stock Analysis Report
HAIN CELESTIAL (HAIN): Free Stock Analysis Report
KRAFT FOODS INC (KFT): Free Stock Analysis Report
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